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Strategies & Market Trends : Gorilla and King Portfolio candidates - Moderated -- Ignore unavailable to you. Want to Upgrade?

To: Apollo who wrote (578)	1/4/2004 12:13:30 AM
From: tinkershaw	Read Replies (1) \| Respond to of 2955

Apollo, Excellent summary. Quick comment on ARMHY. I come across so many articles on ARMHY that make it the prototypical Gorilla that I just cannot post all the links, or even remember where they came from. Recently, I have come across an article stating how ARM's dominance in wireless is transferring to other markets. Companies simply go to ARM for the same sort of reasons that software developers flocked to MSFT or INTC. In addition is the Morgan Stanley report, I've only heard descriptions, that reports that the ARM9 gets 2.5 x the royalty as the ARM7 per core. And we are seeing multiple ARM's per handset, and the more sophisticated the handset the more likely ARM9 and not ARM7 is being used. With just simple market growth to 3G we can expect to ARM royalty revenues just explode over the coming decade. But in addition to this, there was an article, I may have linked to it on NPI on the Fool, where several industry insiders (I think Samsung was one of the companies) indicated that by 2007 the semiconductor market for automobiles would be greater in dollar terms than it is currently for PCs. There are going to be a lot of ARM cores in those automobile semiconductors (not to mention IRF power chips, but another story). What most got me convinced on ARM was when Phillips came out in an interview and stated, flatly, that yes, the ARM core competes with their internally developed cores, but that they hoped that the ARM core would put their cores out of business. Quite simply ARM does was Gorillas do (whether being nice or nasty) they fill a much needed standardization niche. The SoC and wireless industries have, are, or are looking likely to flock to ARM, and support ARM, as this Gorilla. ARM is also performing in textbook fashion. Look at its competitors, particularly MIPS, even as MIPS loses money by the fistful with revenues going down, ARM continues to prosper, and ARM has a much larger multiple than MIPS. What are the difficulties? Intel is trying to co-opt the ARM Gorilla hold by making XScale chips that are not necessarily backward compatible with the rest of the ARM family, although they are forward compatible (something like that). Whereas Motorola has come out and flatly stated they will not use their architectural license to mess with the ARM code and will assure complete architectural uniformity throughout the industry. I have become more skeptical about what are Gorillas and stock stories in general. I have recently torn apart TiVo's business model, been murder on alleged "Gorilla" sightings, et al. But ARM has me excited, as does QCOM (you could perhaps have discerned this by my portfolio holdings). Then again OVTI also has me quite excited (though not for Gorilla, but for King reasons). OVTI is the King, holding more than 2x the market share of its nearest competitor in a market in the tornado, and a tornado that could go on for years. But hopefully I've gotten the enthusiasm out of me and I can go back to more mundane tasks. But I think this is the reason for ARM's ascendance on this board. A conservative board by nature, it will take time for ARM to become more prevalent here, and I think its present frothy valuation is a legitimate short to mid-term concern. Tinker